Healthcare’s Financial Health in Doldrums : Bidhan Chowdhury

·Cost Management is the Key to make Health Institutions Sustainable.

ETHealthWorld

Updated: April 02, 2020, 23:49 IST

By Bidhan ChowdhuryChief Executive Officer, Medi Q Healthcare Group

It’s the financial health which defines the health of an organisation be it a healthcare institution or any other industry. Talking about the Indian healthcare scenario where we have witnessed the downfall of the esteemed healthcare groups: Fortis Healthcare and Wockhardt over a certain time. The similar story was witnessed by the UAE based NMC Health Plc, which operates the largest medical network in the United Arab Emirates, is going through a big turmoil as its founder BR resigned amid charges of corruption, fraud and misrepresentation of his stake. The company stocks were badly hit. From the glorious history where in 2012, NMC was listed in London Stock exchange and it was the first Abu Dhabi Company to list there. Shareholding pattern of the company is similar to what the healthcare companies globally follow. Its top shareholders operated thorough an investment vehicle - BRS International Holding and two banks - Abu Dhabi Bank and Al Salam Bank Bahrain obtained 20 million shares from it. Charges of corruption have severely dented the investment sentiment across healthcare industry and the banks sold more than 8 million of those shares as the enforcement of security.

Such shattering stories where the reputed healthcare players are facing bad financial health it creates a setback for the industry as a whole. Some of the leading healthcare players of the world including the Parkway Group and a host of Middle East players had strengthened the investment sentiment in India. India was emerging as an attractive healthcare investment destination. But the NMC fiasco, the breakout of an oil price war in the middle of the coronavirus crisis, and subsequent plunging of global stock markets have put a big question mark on the health of healthcare in Asia.

Asia’s (especially India and Middle East countries) unique needs should drive priorities for healthcare management. Scientific and process-driven cost management can make the healthcare institutions not only financially viable but also support in providing costeffective care delivery. The healthcare industry needs to go through a major transformation. Affordability and quality services have emerged as two key challenges. Investments and incentives are needed to manage population health smartly and efficiently and here the role of scientific cost management becomes very crucial.

Leading healthcare providers need to be resolute to deliver world-class care costeffectively. Better outcomes have been achieved although, over the years, there has been a steady increase in real estate, material and other costs for private hospitals in these countries. Private hospitals are under great stress now due to increasing operational costs. Both higher capital and operational expenditures pose a significant financial strain on healthcare providers.

If we talk about India, in the past 10 years, Foreign Direct Investment (FDI) has increased considerably. According to a PwC Report on ‘Funding Indian Healthcare,’ from 2011 to 2016,

Private Equity (PE) investments in healthcare increased over 13 times. Value transaction through PE deals increased from 94 million USD in 2011 to 1,275 million USD in 2016, as per the Report. However, though healthcare saw a significant increase in FDI inflow in the last three years, it also witnessed some PE firms backing out. The recent exit of IHH from two projects in India is a case in point.

On the pricing issue, some hospitals in the UAE were shut down. Are Indian private providers would meet the same fate? The answer is No. It is high time to streamline the industry and review it comprehensively. There can be always an argument that the healthcare sector should be taken as a social enterprise with an empathic approach and the hospitals should not be considered as a profitable venture. But health institutions have to maintain the balance between philanthropy and profitability to create a sustainable model. There is no denial of the fact that these institutions have a huge social responsibility, but on the other hand, providing quality healthcare comes at a cost. Huge investment in Medical equipment, shortage medical professionals including doctors, highcost infrastructure put pressure on private as well as public hospitals for financial sustainability.

Meanwhile, the industry is in a crucial transition phase. The cost-effective quality healthcare will emerge out of this phase only. Hospitals having control over their cost nerve will be the leader. Healthcare will have to adopt scientific cost management as philosophy and drive it with robust processes.

Efficient cost management is the key to success. It was promising to note that some big hospitals in Asia have brought in innovations to further push cost management and resource optimization. These innovations have been driving their financial viability and sustainability. Private and public hospitals of the sector need to adopt the models being implemented by these hospitals.

India’s flagship health insurance scheme under Ayushman Bharat Mission or any other health scheme to achieve Universal Health Coverage would remain a dream if the healthcare industry is not able to provide low-cost healthcare services. Low cost does not mean, we have to comprise on quality. With efficient process-driven cost management, quality care can be provided at an affordable cost. There is a need to streamline the complete process and resource allocation. The cost sensitization should be done from the grassroots levels. A change in approach and mindset would certainly deliver the desired results.

Scientific cost management can bridge the existing gap between the expectations of the healthcare providers and the demands of a healthy society. Cost-sensitive healthcare Industry will again attract both PE and domestic investments which would further drive innovations in the sector. Efficient and scientific cost management would lead us to a higher stage of advancement in all these critical components.

DISCLAIMER: The views expressed are solely of the author and ETHealthworld.com does not necessarily subscribe to it. ETHealthworld.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.

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